Reed Hastings, who co-founded the company and has served as CEO for most of its 23 years of existence, will be co-CEO with Sarandos, the company said Thursday. The news was disclosed in a quarterly letter to shareholders, along with results from the second quarter, which were highlighted by a gain of 10 million subscribers.
Since joining the company in March of 2000, Sarandos has spearheaded the approach to programming and been a highly visible ambassador for the company as it has staged a historic disruption of the entertainment business. Forging relationships with talent from the company’s original, cramped office in Beverly Hills, Sarandos leveraged his past in the video retail business to build an ambitious, data-driven operation. From a domestic base of a few hundred thousand subscribers when he came aboard, the company now has 193 million subscribers in more than 200 countries around the world.
“Ted has been my partner for decades. This change makes formal what was already informal — that Ted and I share the leadership of Netflix,” Hastings said in the company letter.
Elaborating on the moves in a blog post, Hastings wrote, “In terms of the day-to-day running of Netflix, I do not expect much to change. Our key executive leadership groups are unchanged. So think of Ted’s well deserved promotion formalizing how we already run the business today.”
Hastings isn’t going anywhere for the time being. In the blog post, though, he described the changes as “part of a long process of succession planning.” While executing regime changes smoothly is difficult, he continued, “I am optimistic because we have a well established culture that’s built to be flexible and many years to get good at this. I’m committed to Netflix for the long term. Here’s to the next decade of great storytelling, better recommendations and a service that we hope brings joy, escape and a sense of connection to hundreds of millions of members around the world.”
Sarandos, 55, has also been elected to the Netflix board of directors and will continue to serve as Chief Content Officer.
“Having watched Reed and Ted work together for so long,” lead independent director Jay Hoag said, “the board and I are confident this is the right step to evolve Netflix’s management structure so that we can continue to best serve our members and shareholders for years to come.”
It is difficult to succinctly catalog all of the ways that Netflix has upended the entertainment business, having started out as a fledgling company specializing in delivering DVDs by mail. Sarandos has steered its content strategy from his arrival in 2000, leading the company through its early licensing of films and TV shows made by other companies to its commitment to making its own.
Binge releasing, one of the key innovations overseen by Sarandos, was introduced to mass audiences in 2013 when House of Cards arrived. Sarandos has championed the release format as a way to satisfy audience appetites, similarly describing the streaming of prestige films as a way to pierce the bubble of exclusivity around film, particularly specialty fare. He also led a massive bet on volume, with the company spending $15 billion on programming this year and planning to continue to increase the outlay. Some of that budget has gone toward locking up major talent like Ryan Murphy, Shonda Rhimes and Barack and Michelle Obama’s Higher Ground, a spree that has posed an additional challenge to traditional media companies.
Born and raised in Phoenix, Sarandos caught on early at video distributor ETD and then made his reputation as an executive at Video City and West Coast Video, onetime rivals of Blockbuster. As the DVD format entered the marketplace in the late-1990s, Sarandos gained the attention of Hastings after a novel revenue-share deal he struck with Hollywood studios earned trade press notice. Hastings assumed Sarandos would move up to Silicon Valley, but Sarandos was living in LA at the time and felt it would be logical for the head of content to be where the creative community was based.
“Watching films and TV all day, and hearing what customers liked, helped me understand people’s dramatically different tastes and moods as well as the value of a good recommendation,” Sarandos wrote in a blog post about his promotion.
Peters, who joined the company specifically to oversee its expansion into streaming during its physical DVD days, has long been a rising star in the management ranks. The title of COO has not previously existed at Netflix. “We want Greg to help us stay aligned and effective as we grow so quickly around the world,” Hastings said.
Along with spearheading Netflix’s move into streaming, Peters oversaw the company’s global expansion, which has been a key to its spectacular growth. After joining the company in 2008, he became Chief Product Officer in 2017, replacing Neil Hunt, a longtime friend and collaborator of Hastings who had been one of the company’s earliest key hires. The dismissal of Hunt by Hastings, which both have described as a difficult episode, is often cited as an example of Netflix’s “keeper test.” The personnel concept challenges supervisors to continually evaluate whether employees are worthy of staying with the company.
“As we’ve grown, one of my biggest roles at Netflix has been to be broad across the company, getting to know many different people in every area of our business,” Hastings wrote in the blog post. “This has helped Netflix stay mostly aligned, loosely coupled and very productive. In his new role, I want Greg to take on more of this work so that we continue to improve rapidly. Eventually he needs to know every corner of Netflix better than I do today.”